Should I fix my old car or buy a new car?

Dear Driving for Dollars,
My car is almost 10 years old with more than 100,000 miles and is starting to cost me a lot of money. Last month, I spent about $1,000 on new tires and brakes and $300 to fix a problem with my power windows.

I love not having a car payment, but these costs are killing me. How do I figure out if the cost of repairs in the future is better than just biting the bullet and buying a new car?
-- Kelly

More On Cars:

Dear Kelly,
From a financial perspective, it's almost always a smarter choice to drive an old car that's paid for than to buy a new car requiring an auto loan.

While your old car is getting up there in miles and age, it doesn't really sound like it's requiring a lot of repairs. In reality, you are spending the majority of your dollars (at least what you cited in your question) on maintenance, and that's a big difference.

Maintenance, which includes regularly scheduled work when your car reaches a certain mileage as well as wear-and-tear items -- such as tires, brakes and windshield wipers -- are costs all car owners incur, regardless of the age of the car. These costs don't disappear with a new car -- unless you buy a model with a free car maintenance plan, and then they may only be free for a limited time.

Even with an inexpensive car and an auto loan at a great interest rate, you are looking at a minimum of about $2,400 annually on car payments alone. It's unlikely your older car will cost you $2,400 in repairs. Either way, you'll likely be paying for maintenance.

Instead, don't let the costs of necessary car maintenance on your used car sneak up on you. Put aside some money each month into a car fund, similar to the way you would if you were making a monthly payment on a car loan. Use the money from that fund for your current car when necessary. If you plan it well, you'll have more money in the fund than you need, which you can use for a down payment when you decide to buy a new car.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

Tara Baukus Mello writes Bankrate's cars blog as well as the weekly Driving for Dollars column, providing both practical financial advice for consumers as well as insight into the latest developments in the automotive world.

Bankrate wants to hear from you and encourages thoughtful and constructive comments. We ask that you stay focused on the story topic, respect other people's opinions, and avoid profanity, offensive statements, illegal contents and advertisement posts. Comments are not reviewed before they are posted. Bankrate reserves the right (but is not obligated) to edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused. We do not permit the inclusion of hyperlinks in comments and may remove any comment that includes a hyperlink.

Bankrate.com is an independent, advertising-supported publisher and comparison service. Bankrate may be compensated in exchange for featured placement of certain sponsored products and services, or your clicking on certain links posted on this website.